If you want loyalty, get a Dog!

I was talking recently with an old colleague who has gone on to have a successful career managing a sales team for one of the larger asset managers and we were ruminating over the dilemma about sales people in the asset management industry these days. His issue was the lack of activity and sales process from certain “old-timers” and he was questioning how to change that. A tough one but it led me to think about how fund sales has changed over the years.

There has been much debate in very recent days about the remuneration of fund managers and their bonus schemes with one famous manager, having pocketed millions over the years in bonuses, now saying no one in his business will get a bonus. Smacks of Poacher turning into a Gamekeeper if you ask me! The same issue could be said for fund sales people and I have seen on Twitter one “Consultant” linking sales bonuses in the same sentence. Bit harsh but I get his point. So how do you reward staff in sales and also how do you recruit and retain these people. I call it the 3 “Ps”.Passion, Performance, Package. They need to have Passion, a deep centred hunger for success; they need to Perform with activity that is relevant to the job and they need to be incentivised with a Package that is commensurate with the role.

It is a truism that the sales environment has changed dramatically over the last 25 years. The industry has basically grown up when it comes to giving advice. Early on the industry knowledge was just beginning and there weren’t that many fund managers out there. Over time fund buyers have become more sophisticated with many heading down the CFA route, which can make some meetings challenging for an unprepared fund manager and an even bigger nightmare for an ill-informed sales person! Gone are the days when a decent fact sheet/presentation with top quartile performance would suffice. Today fund buyers want to know how fund managers actually get their performance; not just attribution analysis but complete portfolio and process analysis to a level that makes it impossible to cover up weaknesses in their process or questions the strategy. So whilst performance can open the door, it will quickly shut if you cannot explain it satisfactorily.

So where does this leave the sales person? Some would argue that sales people do not add value anymore. Wrong! They are invaluable and cannot be overlooked but what are you looking for in a sales person and how do you pay them. Sales is about relationship management and early on it was pretty much little else. (Oh, I used to love those days!) But even that has become more difficult as FCA rules on entertainment mean that it becomes difficult to even buy a coffee, never mind lunch, for a client and thus build a rapport but you still have to try!. So what do sales people actually do for fund managers these days? In short, a lot. They open doors, they monitor the marketplace by keeping up with the constant moves of personnel, they get to understand how fund buyers actually review funds such as what is needed for the fund to be considered, they will give feedback to the business about the funds you are competing against and how you can differentiate your fund and ultimately they can get you closer to the fund buyer, so an element of trust is built. Many funds struggle to grow assets because they just don’t know the market and who to talk to. Equally fund managers don’t make the best sales people. Some do but many lack the basic requirements including time. You need sales people!

So how can you tell which sales person is the right one for you? Many look to the big houses and assume the best must work there. Wrong! The best are the ones who demonstrate a strong sales process with diligence and a dynamic work ethic and they can work for either large or small houses. The decision has to be based on them demonstrating how they go about getting business in, their activity, their reporting and their industry wide knowledge. The biggest shock here is not to judge a sales person based on the amount of sales they have made. I know that sounds counter intuitive but consider that the toughest sales effort is demonstrated by getting funds from $5m to $50m and not from $500m to $5bn. Momentum, marketing and, hopefully by then, a long period of performance gets funds to the mega millions. Sales people then add value by maintaining the relationship, informing fund buyers as to changes in the portfolio and setting up regular reviews etc. They are the connectivity between the business and the client, in short, the glue.

Remuneration is where we started this blog and it is certainly the toughest one to cover. Fund managers want to have the best sales people and as mentioned are often governed by looking at the industry leaders and undoubtedly head-hunters whose motives are not always aligned. Naturally if you pay top whack you will be able to attract most people but are they the sort you want? A good sales person should be able to demonstrate their skills set and a bonus scheme that is linked to KPIs that show them going beyond the norm. Some years ago it was a case of “x” per ￡ millions of gross sales but that is far too subjective and these days it is better to have an alignment of interest based on profitability and activity. It is important to ensure the salary is commensurate with the role but that the bonus is such that there is appetite to over-achieve. Revenue share is often cited and one that should be considered, as at least there is an alignment of interests should assets walk and it can galvanise a sales person to retain assets. It is a fine balance and contentious with many firms but it is vital to motivate people with the right package that recognises asset sales but also activity around that, in the same way rewarding fund managers is not just on their performance but how they got the performance.

Retaining sales people can be the biggest challenge as with all staff. Culture, package, ownership and ultimately mutual respect for each other’s role are vital. I have worked with fund managers who have no idea about what sales people do and equally I have worked with sales people who fail to fully grasp the investment process and as a consequence know what exactly the manager is doing with the portfolio on a day to day basis. Fund managers and sales people are aligned in everything and one cannot exist without the other.

If you get all of the above wrong then the relationship between sales and fund management goes out of alignment and the loyalty of one to another is lost and as the title says this is the time when if you want loyalty, get a dog!

 Enjoy the sunshine!

Regards

Stuart Alexander

CEO